Lloyds Banking Group PLC (LON:LLOY) and Schroders PLC (LON:SDR) have confirmed a plan to create a financial planning joint venture.
The financial planning business will be launched by the middle of 2019 and Lloyds and Schroders hope it will become one of the UK’s top three within five years.
READ: Lloyds in talks to merge wealth-management arm into joint venture with Schroders
Lloyds said the wealth management alliance would address the advice gap among “affluent” customers.
Under the agreement, Lloyds will own 50.1% of the business and Schroders the remainder.
The companies said the joint venture will combine Schroders’ investment and wealth management expertise and technology with Lloyds’ client base and distribution network.
Lloyds will transfer £13bn of assets from its wealth management arm to the joint venture. A further £400mln of existing private clients assets will transfer to Schroders.
Antonio Lorenzo – director of insurance and wealth at Lloyds and chief executive of its subsidiary Scottish Widows – will be chairman of the new business while James Rainbow – Schroders co-head of the UK intermediary– will be its chief executive.
Schroders will also get a contract to manage £80bn worth of assets in Lloyds’ Scottish Widow business that were previously managed by Aberdeen Asset Management before it merged with Standard Life.
Lloyds said it would withdraw £109bn of Scottish Widow assets from Standard Life Aberdeen earlier this year due to competition concerns about the merger. Standard Life Aberdeen is trying has contested Lloyds’ decision to pull the assets and the two firms are currently locked in arbitration about the contract.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said the dispute creates some uncertainty about when the assets may be transferred to Schroders.
"Lloyds and Schroders may be tying the knot but there’s still a somewhat acrimonious divorce going on between the high street bank and Standard Life Aberdeen," he said.
Khalaf said the joint venture offers Lloyds some diversification away from its traditional banking activities but it is unlikely to shift its share price meaningfully until there is some clarity on Brexit.